IE CA 3 Holdings and IE CA 4 Holdings - Case Update

Courts in both Australia and Canada have rejected continued attempts by two bankrupt companies and their principals to prevent their Canadian trustee in bankruptcy from conducting further examinations in Australia. The companies had argued that the proposed examinations violated a prior order of the Canadian court, and that allowing the examinations to occur would be manifestly contrary to Australian public policy. The Canadian court disagreed and ultimately dismissed the application to restrain, while the Australian court dismissed applications brought by the principals to set aside examination summonses issued by the foreign representative of the Canadian bankruptcy trustee.

The application involved IE CA 3 Holdings Ltd. and IE CA 4 Holdings Ltd. (Canadian companies which operate as bitcoin miners), their parent company, IREN Limited, and certain of their principals, who sought to restrain the trustee in bankruptcy, PwC Canada, from proceeding with further examinations in Australia.

IE CA 3 and IE CA 4 were placed into receivership in Canada in February 2023 and then bankruptcy in June 2023. Various issues have been determined in the Canadian bankruptcy proceedings, including a dispute as to whether the principals — individuals resident in Australia — could be compelled to attend examinations under oath in the Canadian bankruptcy proceedings without the need for letters of request. A court order granted in Canada also required the trustee to seek directions from the court before conducting any additional examinations beyond those initially permitted.

Those examinations took place, but failed to produce the level of information required by the trustee to finalise its investigations, so it sought recognition in Australia to allow it to conduct further investigations. IE CA 3, IE CA 4, IREN and the principals unsuccessfully opposed the recognition, invoking the public policy exception to argue that recognition was sought for an improper purpose — to enable the trustee to carry out examinations in Australia, which would be an abuse of process since the Canadian court had already ruled on the extent to which the trustee can undertake examinations.

The Federal Court of Australia disagreed and recognised the bankruptcy proceedings, and the Full Court later dismissed an application for leave to appeal by IREN. IREN, IE CA 3 IE CA 4 and the principals then pivoted to different strategies in both jurisdictions.

In Canada, they asked the court to restrain further examinations of the principals. They claimed that by not returning to the Canadian court for directions, the trustee had circumvented the original order. The Court disagreed, finding that while the original order was indeed restrictive, the trustee’s application to the Australian Federal Court was supported by new evidence and had been appropriately vetted by the Court. The Australian Court had recognised the Canadian proceeding, appointed a foreign representative, and authorised the examinations, explicitly noting this was in cooperation with the Canadian process—not in circumvention of it.

In Australia, they sought to set aside examination summonses issued by the foreign representative of the Canadian bankruptcy trustee, arguing that the summonses were oppressive, constituted an abuse of process, and circumvented the restriction imposed by the Canadian court. The Federal Court rejected these arguments, affirming that the trustee’s actions were not abusive or oppressive. The Court found that the examinations were appropriate and consistent with the trustee’s duty to investigate the affairs of the companies, especially given new evidence and ongoing concerns about intercompany transactions involving related parties. The Court emphasised that the examinations were a valid investigative tool and that any concerns about overlap with the Canadian proceedings did not justify setting aside the summonses.

Read the decision of the Canadian court HERE, and the Australian Federal Court HERE.

Professionals involved:

• Stewart Maiden KC of the Victorian Bar with Vicki Bell of List A Barristers (instructed by White & Case) for PwC, the foreign representative of the Canadian bankruptcy trustee

• Jeremy Giles SC of 7 Wentworth Selborne with Celia Winnett of Sixth Floor Selborne Wentworth Chambers (instructed by Norton Rose Fulbright) for the examinees